Good news for bread prices in South Africa

A contract to conduct inspections into the quality of bread produced in South Africa, which would have likely led to significant cost increases for producers, has been revoked.

These higher costs would have likely resulted in higher bread prices at South African retailers.

Agriculture Minister John Steenhuisen revoked this contract, which was made with Leaf Services and originally proposed in 2016.

The contract would have forced bread producers and retailers to pay Leaf Services a fee to inspect their bread, a service that the Agriculture Department previously offered for free.

Pick n Pay has been a vocal opponent of this contract, and CEO Sean Summers applauded the minister’s decision to revoke it.

Summers said Pick n Pay and other industry role players fully accept that pan bread is legally regulated under the Agricultural Product Standards Act.

However, he said they find it difficult to understand why the department originally considered appointing Leaf Services necessary, which would force the industry to pay for a service that was free in the past.

Alongside Pick n Pay, the Consumer Goods Council of South Africa (CGCSA), Grain SA, and the Chamber of Baking opposed this contract.

The CGCSA successfully challenged Leaf Services’ appointment in court in 2021 and, according to Summers, submitted a new “equally unreasonable business model”.

Summers claimed that no research was conducted at all to establish the level of compliance within the baking industry to see if there was an actual need to conduct inspections in the first place.

“Bread quality is managed by producers, millers and retailers and the Department in the past provided a free service to control quality,” he said.

“The proposed service was not about food safety; it would have simply have looked at composition. It was completely unnecessary.”

Grain SA has also welcomed the minister’s decision, calling it a “victory for inclusive and accountable regulation”.

“We commend the minister and the department for the significant progress made toward a regulatory environment that is principled, transparent, and accountable,” Grain SA CEO Dr Tobias Doyer said. 

“These strides reflect a growing commitment to regulatory stewardship that aligns with global best practices.”

R10 million a year

Summers said the inspection methodology proposed by Leaf Services raised significant concerns for Pick n Pay.

Leaf Services proposed three annual inspections at each of Pick n Pay’s 920 stores across the country.

“The sampling process would have required duplicate samples from each batch and size of bread, drawn from the point of sale,” Summers explained. 

“Given that our batch codes are determined by the day’s production, this methodology would have substantially increased the operational complexity and cost for our business, and that of all other retailers.”

He said that, since Pick n Pay was founded, the retailer has never encountered issues with compliance in its bread. 

He said this underscores Pick n Pay’s commitment to maintaining these standards voluntarily, without the need for external quality control.

“The introduction of this new inspection regime by Leaf Services would have represented an unnecessary cost burden that could be better allocated to further enhancing the value and affordability we provide to our consumers,” he said.

Summers explained that if the minister had not revoked this contract, Pick n Pay would have had to pay around R10 million a year, while Boxer would have paid around R15 million.

He noted that these figures exclude the additional costs of speciality breads and other types of bread produced in the retailer’s in-store bakeries.

Grain SA previously estimated that if Leaf Services’ proposed R4-per-ton fee had been implemented in 2016 as intended, it would have cost its members more than R600 million to date.

“This would have unquestionably raised the price of staples,” Summers said. 

“As it is, basic bread is a low or zero margin product given that it is a staple for most South Africans, especially those under considerable financial strain.”

”We are obviously relieved that the minister listened to concerns raised by so many and took the right decision. This would have been an unconscionable waste of money, to no benefit.”